The REAL reason Slack became a billion dollar company

And why its business model is evilly brilliant, Twitter is going nowhere and how you can replicate that success for your product.

Slack is a dream for every startup founder, investor and VC. It’s the fastest growing startup ever, which is amazing considering it’s a SaaS startup. And all that within its short 2 years of existence. No wonder everyone is analysing how to reproduce this success for their own startup or company.

The first analysis — Slack’s $2.8 Billion Dollar Secret Sauce — that went viral is from Andrew Wilkinson of Metalab, the design agency that helped Slack founder Stewart Butterfield (who was founder of Flickr in case you didn’t know) to turn his code into Slack’s fun product. Being a designer, Andrew’s conclusion is (not that suprising) design focussed: Slack just feels, looks and sounds different than the boring enterprise competition. And that makes it fun to use and turned it into a billion dollar company.

I don’t know about you, but I know tons of startups that look, feel and sound different than their competition and fail miserably.

So pretty soon this answer — Slack’s design is not secret sauce — from Hipchat (competitor) designer Matt Bond popped up. Matt’s conclusions is that the mix of design, product, timing, team, hype and marketing is what made Slack the unicorn company it is today. Sounds like Slack just got lucky then, being there at the right time at the right place with the right people.

I think none of these analysis are spot on. They are definitely not wrong, but they simply count for every successful startup. Now let me tell you the real reason that Slack is a billion dollar company.

The REAL reason

We’ve been using Slack for over a year now at Fileboard (a sales engagement platform) and basically all our internal communication goes via Slack.

So the other day this new team member joined our company, got access to Slack and soon afterwards asked the following question:

“Ok…question…I want to post a comment to a previous specific comment, regarding @satya.vh ‘s posting on May 9, but am not seeing an option to do so…can i not do that, or is this just one long continuous thread???”

Then I remembered when we started using Slack at Fileboard, I really didn’t like it, and it certainly wasn’t fun to use for the exact same reason that my new colleague was pointing out. Slack is just another stream (or streams, if you have more than 1 channel) of continuous information that you have to follow. I remembered I found it distractive and stressful because it was so easy to miss out on stuff.

So then I answered

“Yeah the power of slack is that if you don’t follow it all then time you’ve lost the conversation. So just Slack 24/7 and you’ll be fine :-D”

And then it hit me. This is what drives Slacks’ success. Because if you don’t follow Slack all the time you do not and cannot take part in the conversation with your team members anymore. And that results in:

#1 Social isolation / pressureBecause if you don’t follow Slack all the time, other people reference or know stuff on Slack that you don’t know and you don’t take part in. Within companies it is very important to inform yourself about what’s going on, not only for your job but also for your position within the company and your future ambitions. You start to feel social pressure to follow Slack and post to Slack 24/7.

#2 AddictionNow you start to follow Slack all the time. It’s addictive, resulting in unconscious stress, because you have the feeling you might miss something. I see colleagues Slack at night, weekends, days off, when their wife is labouring, etc, which basically put Slack on the same level as email, Facebook and Whatsapp.

#3 Single source of informationEveryone is now going all-in on Slack because of reason #1 and #2. More and more information is going into Slack (exactly the reason why Slack has hundreds of integrations and more popping up each week) and the team is heavily invested in it.

And before you know there’s no way out. Slack has become part of your company and your companies’ culture. And then you find out you need to start paying…

Why Slack’s business model is evilly brilliant

Slack’s business model is essentially based on historical messages. The free searchable (and viewable limit) is 10.000 messages before you start paying. If you want to find a historical post on Slack, it only gets you 10k messages back unless you start paying.

Which means, If you didn’t check Slack enough, which put you in social isolation, now there’s no way for you to see a conversation ever again and drag yourself out of social isolation. Unless you pay. And the more people in your company, the faster you reach that 10k messages limit. For example, if each person in your company is posting like 100 messages a day, and your team is 100 people in total, you already need to start paying to avoid social isolation.

Before you know, half the people are missing conversations, find themselves socially isolated, and you start paying licenses because your internal communication and company culture just fails.

It’s brilliantly evil.

Why the Slacks alternatives didn’t work.

Now you probably think, yes but there was Yammer before, and Campfire and Hipchat and Skype. I’ve used them but none of them has been as addictive as Slack.

The reason is that they all either implemented threaded comments or didn’t put a message limit. The result is that you don’t have to check the conversation all the time, because you can always take part in it later. Even years later. There’s no social isolation effect, no addiction effect and no reason to keep checking.

If I’d be in competition with Slack I would implement those message limits immediately on my free plans.

Why Twitter fails

So then I started thinking. Slack is like Twitter for business so why is Twitter failing? Twitter also has this continuous stream of information and if you don’t check Twitter you miss great stuff.I realised that Twitter misses this social pressure effect because Twitter is focussed on individuals whereas Slack is focussed on teams. If you miss stuff on Twitter, nobody cares. If you miss stuff on Slack, oh man, you’re a bad colleague.

Hence the reason why Facebook is a billion dollar company as well: if you don’t continuously like stuff of your friends, how well a friend are you? Hence, social pressure makes you keep checking and liking the stuff of your friends.

The same counts for Snapchat. You need to keep checking or the messages just disappear.

How to replicate the success

So yes, to replicate Slacks’ success you need a good designed product, an experienced team, perfect timing and amazing execution, as Andrew Wilkonso, Matt Hobb and Slack founder Steward Butterfield rightfully concluded.

But honestly, there are tons of startups out there that do this well and have not gained as much traction as Slack. So what you simply need to take into account when building, marketing and selling a social tool like Slack is psychology. You will become successful if people feel emotionally locked in because of social pressure. And this pressure makes them invest heavily in your product. (Slack actually needs people to invest a mere 2000 message for the effect to take off)

This is the real reason that makes social platforms like Slack, Facebook and Snapchat billion dollar companies. And it is the reason why Twitter is going nowhere except to failure.

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